Outraged by constant criticism of "fat-cat" councillors awarding themselves huge pay rises, Cardiff's civic rulers hit back with the ultimate weapon: they launched their own 140,000-circulation newspaper and ordered town hall departments to withdraw all job advertising from the local press.

The tit-for-tax exercise was designed, naturally, to portray the council in a positive light and to correct "misrepresentations" in the Welsh media. There was one small problem. The decision, like so many in local government these days, was taken in secret. It was presented to the city council by a ruling elite - Cardiff's new civic cabinet - as little more than a fait accompli. Several brave Labour councillors, bitter critics of the leadership, protested vigorously. Like the public, everyone in the city hall outside this eight-strong elite was kept in the dark.

Cardiff has certainly done itself no favours with a £58,500 pay package for the lord mayor-cum-council leader, Russell Goodway - making him Britain's highest-paid councillor - and allowances for councillors overall now topping £1m annually. Eight rebel members were suspended from the Labour group for daring to voice concern - then reinstated after a party appeal panel ruled in their favour. Three of Cardiff's four constituency Labour parties have howled in protest. Local MPs, including the Welsh first secretary Rhodri Morgan and his wife Julie, are outraged. Now the Welsh assembly has threatened to intervene.

But Cardiff's leaders have a point when they ask why they have been singled out for such hostile treatment from senior party figures as well as Cardiff's evening paper - which carried a large, front-page cartoon of Mr Goodway in a "wanted" poster, with his crime billed as "refusing to listen".

The truth is that ministers, so keen to criticise councils like Cardiff for whipping up hostile publicity against the party, have actively encouraged town hall secrecy and "fat-cat" salaries in their much-vaunted modernising agenda for town halls. Now it is rebounding badly on them as local papers throughout the country complain of secret and often far-reaching cabinet decisions taken in town halls. Old committees were generally open to the press and public, and agendas were published at least three days in advance. Councillors' salaries are rising dramatically, too.

Although a few councils make an attempt to open up cabinet meetings, I have discovered only one authority - the London Borough of Harrow - which actively encourages people to turn up to its meetings, presenting them with bulky reports each month on council policy. Harrow's council leader, Bob Shannon, wonders why other authorities now take so many decisions in private. "What have they got to hide?"

Quite a lot, apparently. Around the country, councillors and senior officers - supported, it seems, by the local government minister, Hilary Armstrong - argue that admitting the public to cabinet meetings would inhibit free discussion and, presumably, slow down the decision-making process. Far better, it seems, to publish reports of cabinet meetings after the event - when decisions have been taken and electors have little chance of influencing policy except at the ballot box.

Such a redefinition of local democracy fills many Labour councillors with horror, which is why they're starting to rebel - with good reason. Courtesy of cabinet government, they're now consigned to a toothless, backbench role, with little access to key policy papers.

The Campaign for Freedom of Information, supported by backbench Labour councillors, MPs, and editors around Britain, is pressing for amendments to the local government bill, now before parliament. The bill will take the modernising agenda significantly further forward - forcing councils to hold referendums on elected mayors, "streamlining" decision making further and, ominously, concentrating power in even fewer hands.

It was, of all people, Margaret Thatcher who steered through a private members' bill in 1960 forcing councils to open up all meetings to the press and public. Committee meetings followed. Updated by another Tory MP in 1985, it became a benchmark for freedom of information, with outsiders getting access to key council papers three days before meetings. "We are now finding a Labour government removing the rights Mrs Thatcher gave us," says Andrew Ecclestone of the Campaign for Freedom of Information.

Only five years ago the Department of the Environment, which is driving through the latest reforms, commissioned research from the Policy Studies Institute which found that the 1985 act had ensured a "basic level of openness and accountability" in local government, while councils had no trouble implementing the legislation. The department welcomed the study.

Ministers driving through these reforms - ironically, the man in overall charge, John Prescott, has publicly voiced his scepticism - are not welcoming criticism from within their own party, but they know it won't go away. As key councillors prepare for a confrontation over elected mayors, the battle could only be starting.